Trudeau’s optimism hits an economic wall

There’s a deep disconnect between confidence in the Trudeau government — which is soaring — and the economic confidence of middle class Canadians — which is tanking.

“We have the highest numbers of trust and ‘right direction’ I’ve seen in 20 years, and the worst economic confidence numbers I’ve seen in 20 years,” said EKOS president Frank Graves.

In a recent presentation called Rethinking Government, the pollster noted that recent polling puts Justin Trudeau’s approval rating at 65 per cent, with 60 per cent of Canadians saying they think the country is moving in the right direction. If an election were to be held today, the Liberals would be returned to office with 46 per cent of the vote, against 28 per cent for the Conservatives and 15 per cent for the NDP. A landslide.

But Canadians’ economic outlook, said Graves, “is very bleak, darker for the future” and anticipates a “broken” middle class.

The attitudinal divide on the middle class is particularly striking. Fully 86 per cent of respondents polled by EKOS agree that “a growing and optimistic middle class is an essential component of societal progress.”

And yet, 69 per cent of Canadians think the middle class is shrinking; only 12 per cent think it’s growing. Another 56 per cent of respondents are pessimistic about the future of the middle class, while only 16 per cent are optimistic.

Questions about the fate and future growth of the middle class, said Graves, always come down to the very personal — to how individual Canadians are feeling about their lives and their prospects.

In terms of how Canadians see their own position on the economic ladder, just 47 per cent now identify themselves as middle class, down from 62 per cent only 12 years ago. There’s an identical middle class crisis of confidence going on in the U.S., where 46 per cent now see themselves as middle class, down from 61 per cent in 2004.

The generational outlook is similarly negative. Asked in 2014 whether the next generation “will be better off, worse off or about the same … 25 years from now,” 59 per cent picked “worse off” — up from 52 per cent in 2005.

Graves said we are living through “a protracted period of stagnation and the end of economic progress as we knew it at the end of the 20th century.”

It’s not a phenomenon you can tie to particular events, such as the bursting of the dot-com bubble in 2000 or the Great Recession of 2008-09 — the steepest economic downturn since the end of the Second World War, one so severe that we’re still feeling its effects. There’s a generational employment gap, too — with boomers staying in the job market past retirement age while millennials with university degrees camp out in their parents’ basements as they look for work in an online economy. Job security is a huge issue, forming part of the discussion about income inequality.

“Younger generations,” said Graves, “are much more likely to be falling backward and (to) see an even steeper decline in the future.”

When Trudeau announced for the Liberal leadership in the fall of 2012, he declared that putting the party back in touch with the middle class would be his priority for his campaign. He ran on a middle class tax cut in the 2015 election, and delivered a modest one in the throne speech and the first sitting of the new Parliament. The middle tax rate was reduced from 22 to 20.5 per cent effective in January for those earning between $45,000 and $90,000 a year, while the top marginal rate was increased from 29 to 33 per cent for people making more than $200,000 a year.

And in the Liberals’ first budget in March, they introduced a revamped Canada Child Benefit that’s tax-free at the lower end, and means-tested for wealthier families.

The budget itself was titled ‘Growing the Middle Class’ and declared that “building an economy that works for middle class Canadians and their families is this government’s top priority.”

In effect, Trudeau has made “growing the middle class” his signature economic and social issue, at a time when Canadians see the middle class contracting.

Which is why the Liberals are running a stimulative deficit of nearly $30 billion in the current fiscal year. There’s only so much you can do with fiscal policy, however. On the monetary policy front, the Bank of Canada continues to pump liquidity into the market by keeping its overnight rate at 0.5 per cent.

But the Canadian economy has been hobbled by the crash of oil prices and layoffs in the Alberta oilpatch, compounded by wildfires and the evacuation of Fort McMurray in May. Unemployment in Alberta — at 8.6 per cent — is now higher than it is in Nova Scotia.

In July, the national unemployment rate edged up to 6.9 per cent as the economy shed 31,000 jobs. In the U.S., unemployment stood at 5 per cent last month, adding 255,000 jobs. That should be good for Canadian exports, especially with the loonie around 77 cents U.S.

But these are seasonal numbers. Questions about the fate and future growth of the middle class, said Graves, always come down to the very personal — to how individual Canadians are feeling about their lives and their prospects.

“Optimism,” he said, “is essential for progress.”

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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Author

L. Ian MacDonald is editor of Policy, the bi-monthly magazine of Canadian politics and public policy. He is the author of five books. He served as chief speechwriter to Prime Minister Brian Mulroney from 1985-88, and later as head of the public affairs division of the Canadian Embassy in Washington from 1992-94.